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We have seen how The Russian invasion of Ukraine – coming after the Covid supply disruptions – pushed food prices to record highsaccording to the Food and Agriculture Organization of the United Nations.
War-induced supply shortfall could push global food and feed prices up to 22% above their already high prices, the FAO said late last week.
Wheat prices led the increases, not least because Ukraine itself accounts for about one-eighth of world trade in this commodity, or about 25 million tonnes in a normal year. Russian exports are also likely to face more sanctions.
According to Stefan Vogel, director of the Australian unit of RaboResearch, the most immediate risk – which is not so priced in the commodity markets – concerns spring crops which are not yet planted in Ukraine, namely the corn and sunflower.
The European Union, for example, sources 40-60% of its animal feed grain from Ukraine. The United States would be a potential supplier, but the EU restricts GM crops, making Brazil the only major alternative source, Vogel said.
Brazil’s grain harvest was poor last year, so supplies are not expected to be as low.
“Brazil has to be exceptionally good – and it doesn’t look like it right now, but we’re in the early stages – to really put price pressure on the corn market,” Vogel said.
While wealthier nations can mix supplies and substitute crops, poorer ones don’t have that luxury.
Assuming prolonged disruptions, the global number of undernourished people could rise by 8 to 13 million people in 2022/23, with the steepest increases taking place in Asia-Pacific, followed by sub-Saharan Africa and the Middle East. Near East and North. Africa,” the FAO said.
Vogel expects the impact on food prices to be long-lasting, particularly because energy prices are expected to remain high, driving up the cost of inputs, including fertilizers.
“I think the grain market has to pull through [shock] not just in the next two months, but probably in the next two years,” he said.